Tariff Policy - Liberalization or protectionism?

American manufacturers and westerners, convinced of Britain's
intention to destroy the growing (though suffering) U.S. economy, pursued
the nationalistic American System, designed to provide Americans with
independent control over their economy. High-tariff protectionism, the
antithesis of Adams's reciprocal tariff policy, would build the
American System. Economic defense drove this conception of tariff policy,
but advocates also argued that it would achieve the same goal as that
pursued by the trade liberalizers. Protectionism would catalyze the
production of raw materials at home while promoting increased surplus of
manufactured goods for export. U.S. producers and labor would be the
beneficiaries. European powers, prevented from further monopolizing the
U.S. and Latin American markets, would be the losers. A high-tariff policy
would result in economic independence for the United States, whose
diplomats could then use the leverage of their closed market to pry open
European colonies and markets. Clay believed tariff mercantilism would
benefit the American economy, and thus serve as a weapon in diplomacy that
could bring greater national security and even lead to U.S. imperial
expansion. Of course, such a tariff policy was anathema to merchants,
southerners, and others concerned about American diplomacy. The former
noted that expansion into Latin America could never compensate for
Britain's likely retaliation against U.S. exports. In addition, the
revolutions then erupting across Latin America meant that the region would
not be a reliable buyer of American products. And angering Spain by
supporting the rebels might hurt U.S. trade with Cuba, to the benefit of
other European powers. Southerners argued that protectionism would prompt
Britain to turn to Latin America and away from the United States, thereby
depleting the latter of manufactures that were traded for cotton. Latin
America would become Britain's economic colony. Beyond the
favoritism that high tariffs gave to northern manufacturers over western
and southern farmers, low-tariff advocates warned that U.S. prosperity and
expansion were at stake.

This debate led to considerations of tariff policy and diplomacy.
President James Monroe supported revolutionaries in Latin America, but he
also worried that Europeans would intervene to rescue their regional
compatriot, Spain, against the forces of republicanism. He sought caution.
Meanwhile, though siding with the northern merchants in their quest for
profits, John Quincy Adams pushed for trade liberalization mostly on the
principles of the open door and competition in global markets. He was
determined to destroy European colonialism and impose an ideology of
American-led trade liberalization that would boost U.S. commerce. He
feared that without this course, not only would the United States continue
to suffer deprivation from foreign mercantilism but that Latin American
rebels would sign agreements for special trade privileges with the
Europeans. Thus, the Monroe Doctrine of 1823, based on commercial
diplomacy and drawing support from both liberal traders and
protectionists, warned Europe not to extend its "system" to
the Western Hemisphere.

Another significant consensus was reached when John Quincy Adams became
president in 1825, for by then he and Clay had accepted the basic
foundations of each other's approaches. Adams committed to the
American System and lived with Clay's protective tariff of 1824,
which raised rates from the 1816 levels. Even liberal traders supported
the notion of incidental protection for industry. For his part, Clay, the
new secretary of state, attended to commercial reciprocity, even though he
was skeptical that pleasing foreigners would lessen their protectionism.
He negotiated a trade treaty with new Central American republics that
served as a model of tariff liberalization. The tariff policy consensus
was also served by the political alignments over the tariff of 1824, in
which Westerners joined with divided northerners to back protectionism,
but this result turned out to be temporary.

The culmination of the protectionist campaign was the so-called Tariff of
Abominations of 1828, which enacted the highest tariffs in U.S. history.
This law emerged after the celebrated debates between Clay and New England
Representative Daniel Webster, who called the American System destructive
to international commerce. Webster noted, for instance, the striking
development of England's gradual phasing out of trade restrictions.
He lost the day in 1828, yet the revision of 1833 reduced protectionism. A
depression three years later led to the return to power of the Whigs and
to a higher tariff in 1842. The West had turned to local needs, however,
and flipped to the liberal trade side. Indeed, until the Civil War,
tariffs slowly fell, although they remained high relative to the
pre-Napoleonic period.

Regardless of the tariff, or tariff policy, scholars generally accept that
neither tariffs nor the effort to forge commercial treaties with Latin
America had much effect on U.S. growth, over-seas expansion, or trade with
the Europeans from 1820 to the Civil War. This conclusion satisfies
scholars who support freer trade. They conclude that the high-tariff era
came at an opportune time when American diplomacy focused more on
continental rather than overseas expansion, and thus protectionism did not
excite foreign concerns. But backers of the protectionist cause also are
satisfied, for they argue that a protective tariff did not impede the
nation's growth. Rather, it might have aided that growth.

The way of thinking that forged the American System faded away, with
low-tariff Democrats asserting that the tariff should be for revenue only,
and not for protection of industries. By the mid-1850s, the Democrats
declared themselves in favor of "progressive" liberal trade
the world over. They cut duties in 1857 and continued to negotiate
reciprocity treaties with other nations. In 1854, the United States and
Canada agreed to free trade in certain goods (although Congress abrogated
the pact because it was not reciprocal). Canada gained from cuts in raw
materials but raised its tariffs on U.S. manufactured goods. The
expansionists also forged accords with China (1844) and Japan (1854),
although these were one-sided arrangements that privileged American
exports in those markets. These treaties represented the continued
interest in reciprocity in tariff policy. But it was growing sectionalism,
not the impact of tariff policies, that had the greatest bearing on
American diplomacy. Thus, trade liberalism—a pursuit of freer trade
tempered by protectionism—remained the general approach in tariff
policy.